Everyone wants to retire with an adequate amount of retirement savings. However, there are so many factors that cannot be predicted that people often feel overwhelmed when they ask themselves, “How much should I save for retirement?”
Due to simplicity, it is recommended that you try and establish a set percentage of your income to save for retirement.
What The Experts Say
What percentage should you be saving for retirement?
I took some time looking through the books on my shelf trying to see if there a consensus to the question, “What percentage should i save for retirement?” Here is what I found from my research:
- Dave Ramsey from The Total Money Makeover – 15% of your income
- Austin Pryor from The Sound Mind Investing Handbook – No set percentage, but instead there is a nine page retirement planning worksheet
- David Chilton from The Wealthy Barber – 10% of your income
- Mary Hunt from Debt Proof Your Marriage – 10% of your income
- George Clason from The Richest Man In Babylon – no less than 10% of your income
- David Bach from The Automatic Millionaire – 10% of your income
- Larry Burkett from Money Matters: Answers To Your Financial Questions – 5% savings, 5% retirement. It seems like he is suggesting 10% unless you are doing some saving for other things.
Conclusion: There is no right answer that applies to every person in every circumstance. When this is the case, we are forced to consider our own situation and our own needs to establish an appropriate amount to save for retirement.
What is the Right Amount To Save For Retirement?
With the exception of Austin Pryor, all of these other folks are trying to boil your retirement numbers down into a single simple percentage. Why do we need these percentage suggestions? Because most people won’t do the work necessary to complete a full retirement worksheet. Most folks just want you to give them a number so they can save accordingly.
But, your retirement situation is completely unique.
- Is there a company match? If yes, you can save more with less of your own income.
- Did you start young? If yes, you’ve got a good head start so you could gravitate to some of the lower suggestions.
- Do you plan to significantly increase your income in the future? If yes, saving 10% of your income might result in the appropriate nest egg.
- Do you plan to retire? If no, a smaller retirement balance would be appropriate.
- Are you in debt? For those in debt, paying off debt should be a greater priority than saving for retirement.
I believe that Christians should be saving for retirement, but I also believe there is a point when Christians should be able to say they have enough for retirement. If you don’t believe this, then the amount to save for retirement is simple – as much as you can.
However, I believe it is virtuous to appropriately balance your retirement savings so you save an appropriate amount.
“Two things I ask of you, O Lord; do not refuse me before I die: Keep falsehood and lies far from me; give me neither poverty nor riches, but give me only my daily bread. Otherwise, I may have too much and disown you and say, ‘Who is the Lord?’ Or I may become poor and steal, and so dishonor the name of my God. (Proverbs 30:7-9 NIV)
On the other hand, if someone is in their 50’s and is just starting to save for retirement, they may need to surpass some of the suggested percentages listed above.
Save While You’re Young
Retirement planning for young people is very different than retirement planning for more mature adults. Because of this, I suggest a special retirement saving approach for those who start retirement savings in their early 20’s.
Give generously and save aggressively when you are younger. Since Dave Ramsey suggests the most aggressive saving percentage, you should make it your goal to start off saving 15% for retirement.
After five years of saving 15%, prayerfully consider reducing your retirement savings by 1-2%. Repeat this process every 3-5 years.
When you are within 10 years of retirement, revisit your numbers. If you want to increase your retirement back up to 15% for the final stretch, then that is fine. However, if you are on track to reach your retirement goals, then just keep up with your smaller retirement savings.
Remember: You must personalize this information. How old were you when you started saving? How much money do you need in retirement? Do you plan to work in retirement? How you answer this question greatly impacts what will and will not work for you.
Do you think people should ever consider reducing their retirement contributions, or is more always better? How do you determine what percentage to save for retirement?
I appreciate you emphasizing that retirement saving is very personal. My experience with people is many of them are not saving anything. What has been recommended to me is that every time you receive a raise you up your retirement amount by at least 1%.
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The text book answer is always to save as much as possible as early as possible, but practically speaking…
For most people, expenses are relatively high when you’re young–especially if you have a family. Income doesn’t usually max until the 40s or even 50s, SO, being the contrarian that I am, I think you save a manageable amount early in life, and do it steadily, then increase with age and income.
There’s a dual benefit to this since increasing retirement savings when income is highest will control lifestyly inflation and get you accustomed to living beneath your means, which really is the other half of retirement–the expense side.
It may also be that you find that you like your work enough when you’re in your 50s that you have no need to fully retire. In that case, having a multimillion dollar retirement will have proven to be a misallocation in a real way. Let’s be honest–retirement savings will compete with other needs, like living expenses and giving.
It would be unfortunate if you avoided living and giving in favor of a fat retirement that was never necessary. This is especially true for a Christian.
Philip (RAOP) says
I knew the different experts had different answers. I hadn’t ever taken the time to compare them though. Thanks for doing the leg work for me. I have always shot for somewhere between 10% and 15% myself. Right now, between my contributions and my works matching I am at 14% and feel comfortable with that.
The trick is to keep your lifestyle down so you can enjoy life and still give. Oddly enough, this has a second benefit of lowering your retirement expenses as well. After all, if you are not use to living on 100% of your income when you are working then you don’t need to maintain 80% when you retire.
Thanks for the article. It is always important to keep retirement in mind. For some reason, it helps keep things in perspective.
So tough. I wrote a post that showed that a chart from 1980-2000. A nice growth line, extended from 2000-2009 would put us at 3600 S&P now. So how do you plan? Even though I knew that crazy growth wouldn’t continue, from 1400 we should be at 2800 just doubling in a full decade instead of flat or down.
If people can budget to save 20% it will be far easier to adjust as life goes on than to be in your 40’s or 50’s and realize retirement is impossible.
We save about 25% of gross including the 401(k) match, another 15% or so paying down the mortgage faster.
Some random thoughts.
One very basic thing that factors into retirement savings is how much you make to begin with. Being faithful with what you have as you have it comes first (tithe and taxes), then budgeting what’s left.
Praying for God’s provision is an aspect you touched on, “give me neither poverty or riches” or as Jesus said “give us this day, our daily bread”. The prayers are continual, as is our looking to Him for everything. When we stop and trust in our nest egg, we dry up.
Being a poor steward of our work and efforts is also not an option. A man who does provide for his own has denied the faith.
Where the bible is silent about something (what percentage to save for future needs), wise counsel should be considered just that, and not set in concrete truth. God has rich and poor in His body to serve Him where they are. None of us are to trust in our riches or great planning, or complain over our lack, but are to seek strength in Christ as stewards of little or much. It’s all His, we’re just administrators, and will give an account at the end.
One thing that we often miss is that retirement is not generally a biblical concept. Sure the Levites quit the heavy physical work at 50, but continued on as teachers and judges in their cities. Moses started at 80.
When retirement is our driving goal, we may become hardened to opportunities to do good for others along the way. Those that had houses or lands in the early church sold them and shared what they had, so that no one lacked. And the church prospered.
So the question is not, “what percentage do I need to save for a comfortable retirement?” but the much more searching, “what honors God the best with what I have available?” Does He want me to retire in the conventional sense to some senior community somewhere or is this an opportunity to do something different for Him because I’m now free from the daily slugging it out to make ends meet?
I have been widowed about six months. I am barely 71 yrs. old. My retirement is a portion of my late husbands Military Retirement and Social Security. I have no credit cards, no morgage or rent I have taxes on house and land. I have an emergency fund of $14,000. Two other beginning savings.
Do I still need a Retirement Fund added?
How much do i need to save for retirement. I have currently around $650K and make around $220K, age 49, am I not saving enough if i want to retire at 62?